In a series of unexpected events occurring between May and July 2023, Multichain, a blockchain project, witnessed the apprehension of its CEO, Zhaojun, by Chinese authorities, resulting in a significant upheaval. The situation worsened when user assets started being transferred to unknown destinations.

From Seizure to Shutdown: Unraveling the Multichain Crisis

The Multichain community was initially shocked on May 21, 2023, when news broke that CEO Zhaojun had been detained by Chinese police. This sudden development left the global team in disarray as they discovered that their access keys to the Multichain Processing Component (MPC) node servers had been revoked. Adding to the complexity, these servers were managed solely under Zhaojun’s personal cloud server account, granting no one else access.

The situation took a further turn for the worse when the team made contact with Zhaojun’s family. It was revealed that all of Zhaojun’s devices, hardware wallets, and mnemonic phrases had been confiscated, along with control over operational funds and investments. This realization highlighted the fact that the team’s funds and server access were entirely in Zhaojun’s possession and, subsequently, under the control of Chinese authorities.

With limited information about Zhaojun’s case, the team found themselves in a precarious position, striving to maintain operations using the limited access they still had. Complying with local laws and the family’s wishes, the team chose to withhold information from the public for several days. However, by May 30, they responsibly informed the community about Zhaojun’s disappearance and the ensuing technical challenges.

As of July 14, 2023, Multichain’s total value locked (TVL) stood at $136.91 million.

Early June brought a glimmer of hope when Zhaojun’s family managed to log into the cloud server platform, albeit with restrictions on engineers’ access. With ongoing communication between the family, their lawyer, and the authorities, the team was assured of Zhaojun’s imminent release. They were encouraged to continue maintaining the system, but details regarding the case remained scarce.

Since the issues with the CEO surfaced, Multichain’s native cryptocurrency, MULTI, experienced a significant decline. Following the July 14, 2023 announcement, MULTI plummeted by 4.15%, accumulating a decline of over 17% for the week.

According to the team’s account of the situation, the Multichain protocol continued to function as intended, despite the challenges. Despite their limited resources, the team claimed to have worked tirelessly to ensure smooth operations and resolve the mounting user issues. However, this period of uncertainty also witnessed an abnormal transfer of user assets from the MPC addresses to unknown destinations, raising concerns about the integrity of the system.

Amid the crisis, on July 9, Zhaojun’s sister assumed control of the remaining assets in the router pool. While she maintained communication with the team and project parties, this action added another layer of complexity to an already bewildering situation. Unbeknownst to them, this foreshadowed the subsequent shockwave.

On July 13, Zhaojun’s sister was also taken into police custody, severing yet another point of contact. Left in the dark regarding the status of the preserved assets, the team was compelled to inform the community about the deteriorating situation. With no alternative information sources or operational funds, they had no choice but to halt operations entirely.

The downfall of Multichain serves as a stark reminder of the vulnerability of centralized operational practices within projects that advocate for decentralization. Stripped of access to their domain account, the team implores users not to utilize Multichain services and seeks assistance from the domain firm Godaddy to dismantle the platform. As the dust settles, this incident stands as a sobering reminder of the inherent risks within the crypto-sphere and the pressing need for robust security measures.

We welcome your thoughts and opinions on the Multichain issues. How can companies like Multichain better prepare for unforeseen events? Please share your insights in the comments section below.

Frequently Asked Questions (FAQs) about blockchain security

What events led to the downfall of Multichain?

In a series of unexpected events, the CEO of Multichain, Zhaojun, was apprehended by Chinese authorities, resulting in operational disruptions and security breaches within the blockchain project.

How did the Multichain team respond to the CEO’s apprehension?

The Multichain team faced a challenging situation when they discovered that their operational access keys had been revoked and were managed solely under Zhaojun’s personal cloud server account. They worked to maintain operations with limited access while adhering to local laws and the family’s wishes.

What impact did the CEO’s disappearance have on user assets?

With Zhaojun’s devices, hardware wallets, and control over operational funds confiscated, the team found themselves in a difficult position. User assets started being transferred to unknown destinations, raising concerns about the integrity of the system and further complicating the situation.

How did Multichain’s value and operations fare during this period?

Multichain’s native cryptocurrency, MULTI, experienced a significant decline, shedding 4.15% after the announcement of Zhaojun’s issues. The team claimed that the Multichain protocol continued to function as designed, albeit with limited resources, as they worked tirelessly to maintain operations and resolve user issues.

What led to the ultimate shutdown of Multichain?

The situation worsened when Zhaojun’s sister, who had control over the remaining assets, was also taken into custody. With no alternative information sources or operational funds, the team had no choice but to cease operations entirely, leading to the shutdown of Multichain.

What lessons can be learned from the Multichain incident?

The Multichain saga highlights the risks associated with centralized operational practices in projects advocating for decentralization. It emphasizes the need for robust security measures and contingency plans to better prepare for unforeseen events in the crypto-sphere.

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